Michael J. Rosen, CFRE

Michael J. Rosen, CFRE is President of ML Innovations, Inc., a fundraising and marketing consulting firm serving nonprofit organizations and the companies that assist them. An AFP Certified Master Trainer and Certified Fundraising Executive, Michael is the author of the bestselling book "Donor-Centered Planned Gift Marketing."

Email Subscription

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Related Links

Archive for January, 2012

Two relatively recent news events have raised the issue of nonprofit organizations returning gifts to donors:

The mainstream media wanted to know if Penn State University should return donations to donors who ask for a refund or should Penn State stick to its longstanding policy of not returning gifts. Following the Jerry Sandusky child sex-abuse scandal, the University affirmed its no-refund policy in its official talking points.

The mainstream media also took notice of a lawsuit filed by country music star Garth Brooks against INTEGRIS Canadian Valley Regional Hospital. Brooks sought the return of a $500,000 contribution. The media wondered if the Hospital should have returned the donation before things ended up in court.

Since much has already been said about whether gifts should be returned upon a request by a donor, I want to focus on whether a nonprofit organization can legally return a donation.

I’m not a lawyer. So, I decided to contact one. I spoke with a high-ranking state official who specializes in the regulation of nonprofit organizations. The official requested anonymity since we were discussing hypothetical situations.

Under certain circumstances, nonprofit organizations can refund a donor’s contribution. However, under other circumstances, returning a donor’s gift could result in a review by state authorities. Whether or not a situation results in state review will depend on a given state’s regulations, the impact returning the gift would have on the nonprofit, and the size of the gift in question,.

Different states have different laws and regulations governing nonprofit organizations. However, most, if not all, state rules are vague on the point of charities returning gifts. What states do recognize is that when a donor gives money to a nonprofit organization, that money is no longer the donor’s once accepted by the charity. Instead, the money is, in effect, owned by the public interest. Because nonprofit organizations exist to benefit the public interest, regulators will be concerned that gifts are used to further the public interest. Returning a donor’s gift could be contrary to the public interest. That’s the issue for regulators.

For example, a donor may want his $1 million gift returned. However, at the time of the request, the nonprofit may have already spent the money on construction of a new building. It may no longer be holding the donor’s money. And, it may not have sufficient cash on-hand to provide a refund. Or, providing a refund may substantially hurt the organization’s financial health. In such a situation, state regulators might find that returning the gift could be counter to the public interest and might move to block a refund.

[Publisher’s Note: “Special Reports” are posted from time-to-time as a benefit for subscribers and frequent visitors to this blog. “Special Reports” are not widely promoted. To be notified of all new posts, including “Special Reports,” please take a moment to subscribe in the right-hand column.]

The winner of the free book contest is Rhonda Huber from Provena Health.

I thank everyone who participated in the contest by commenting, and I congratulate Rhonda!

I also want to thank Chris Kirchner, Executive Director of the Philadelphia Children’s Alliance, for agreeing to draw the winning entry. PCA is an organization that brings justice and healing to the victims of child sexual abuse, a crime impacting one in four girls and one in six boys.

If you’re interested in purchasing a copy of Donor-Centered Planned Gift Marketing, you will find it at your favorite book retailer or by clicking the link which will take you to The Nonprofit Bookstore (powered by Amazon). The book is on the official CFRE International Resource Reading List. For my work on the book, I received the AFP/Skystone Partners Prize for Research in Fundraising and Philanthropy making it the first time in more than a decade that an author has been presented the AFP/Skystone Prize for a book about planned giving.

[Publisher’s Note: “Special Reports” are posted from time-to-time as a benefit for subscribers and frequent visitors to this blog. “Special Reports” are not widely promoted. To be notified of all new posts, including “Special Reports,” please take a moment to subscribe in the right-hand column.]

Happy Valley Pennsylvania, home of Penn State University, is not happy at all today. Former Football Coach and NCAA legend Joe Paterno, 85, died on Sunday, January 22, after a fight with lung cancer.

JoePa will be remembered as the winningest college football coach ever with 409 wins, 136 losses, and 3 ties. Under his leadership the Nittany Lions won two national championships. He achieved this remarkable record while insisting upon good sportsmanship and a commitment to academics. It’s interesting to note that it is not the football stadium at Penn State that carries Paterno’s name, it is the library.

Paterno will also be remembered for his role in the Jerry Sandusky child sex-abuse scandal. The Penn State Board of Trustees, and even Paterno himself, thought he could have done more. His actions or inaction in the case and his subsequent firing will always be part of his legacy.

The Paterno story is a complicated one. He was certainly not the perfect man of myth. But, there is no denying the enormous good he accomplished on and off the gridiron.

The news about country-music superstar Garth Brooks this week was not about his latest appearance on stage. Instead, the big story was about his appearance in a courtroom as jury selection began in his civil lawsuit against Integris Canadian Valley Regional Hospital, Yukon, OK. Brooks is seeking the return of his $500,000 contribution since the Hospital has neglected to name a building after his late mother, as he asserts was the agreement.

Country Music Star Garth Brooks

This news story raises operational and ethical issues for all nonprofit organizations that we can explore now. As time goes on, there will be additional lessons to be learned about both fundraising and public relations.

Despite many news reports on the subject, many of the details of the case are not clear including the timeline of events. As the trial proceeds, we’ll certainly get more information about what happened.

Here is what we know at this point:

Brooks contributed $500,000 to the Integris Canadian Valley Regional Hospital, his hometown hospital, in 2005.

Brooks filed his lawsuit in 2009. Brooks alleges breach of contract, revocation of gift/constructive trust, fraud in the inducement, and negligent misrepresentation/constructive fraud.

Jury selection for the civil trial began this week.

Beginning in late 2003 or early 2004, Brooks says that the Hospital courted his support and often discussed naming a building after his mother, even showing him mock-ups. Brooks asserts that the Hospital ultimately promised to name at least part of the facility after his mother.

The Hospital asserts that the gift was unconditional.

The Hospital has not named a building after Brooks’ mother.

A Hospital official says the Brooks donation has not been spent and remains in a Hospital account.

Here are some questions I have:

Is there a written gift agreement?

Do any copies of the named-building mock-ups exist?

If the gift was made in 2005, why hasn’t the Hospital put it to use?

Why didn’t the Hospital return the gift since it’s just been sitting on it for six years?

While we will certainly learn more in the coming weeks, there are already some lessons we can learn from this story:

Gift Agreements. If Integris and Brooks had a well written gift agreement in place, it’s doubtful that the situation would have ended up in court. When a donor makes a substantial contribution, it’s a great idea to put together a gift agreement that details what is to be given by the donor and when. And, the agreement should also outline what the nonprofit is offering in return and when. In addition, the gift agreement should detail how the donation will be used, for what and when. A solid gift agreement will ensure that both sides understand the nature of the relationship. Getting everyone on the same page is essential. A gift agreement will make it more difficult for either party to deviate from the understanding and it will avoid confusion and disappointment.

Even if Integris and Brooks did not have a written gift agreement, they still might have had a verbal contract. If the existence of a verbal contract can be proven, it is just as binding as a written contract. Brooks’ claims are based either on a written gift agreement or a verbal agreement. A well written gift agreement could have avoided a lot of stress for both parties. In any event, Integris should have done everything possible to avoid a trip to court and the resulting horrible, probably costly, publicity.

[Publisher’s Note: “Special Reports” are posted from time-to-time as a benefit for subscribers and frequent visitors to this blog. “Special Reports” are not widely promoted. To be notified of all new posts, including “Special Reports,” please take a moment to subscribe in the right-hand column.]

Blackbaud announced this week that it has acquired rival Convio for $312 million. Blackbaud, with 25,000 customers, is recognized as the leading back-end technology solution for nonprofit organizations. Convio, with 1,500 customers, is best known for its web-based relationship management systems, particularly for advocacy and peer-to-peer fundraising.

It remains to be seen what the impact of the deal will be on the nonprofit sector and how long it will take the sector to feel the impact.

I always find January to be a bit of a let-down. By contrast, December is very festive with Chanukah, Christmas, Kwanzaa, Festivus, and New Year’s Eve. But January? January is dark, cold, and filled with post-holiday malaise.

So, I thought I would do something to bring a bit of fun into January.

In honor of the Martin Luther King, Jr. National Day of Service (January 16), publisher John Wiley & Sons and I will be giving away one free copy of my book, Donor-Centered Planned Gift Marketing.

MLK Day recognizes the birth of King while encouraging citizen action. Many in the nonprofit sector have embraced this day to promote volunteerism. Since my book helps nonprofit organizations secure much needed resources, I thought a planned-giving book give-away would be just one small thing I could do at this special time of year.

In a moment, I’ll tell you how you can enter to win. First, I want to say that I think planned giving is a very attractive way for individuals to support favorite charities, especially during challenging economic times.

A few years back, I was trying to explain to my oldest, childless aunt what it is I do for a living. I tried explaining planned giving. Grasping what I was saying, she asked, “Why on Earth would someone give to a charity after they’re dead?” I asked her, “What charities do you support now?” Among the organizations she supports is an animal welfare group. I then asked, “Who’s going to take care of the little puppies and kittens after you’re no longer here to keep writing checks?” Her eyes widened and, in that moment, I think I might have lost my inheritance.

Planned giving allows people to continue to support organizations they are passionate about after they are no longer here to keep writing checks. In addition, planned giving may help donors lower their taxes, pass money and property on to heirs in an efficient way, generate an income, or provide major gifts to organizations without making any sacrifice during their lifetime. All of these benefits of planned giving are magnified during challenging economic times.

For these reasons, among others, I strongly believe that now is a great time to talk with people about gift planning. Today, given economic uncertainty, individuals might be uncomfortable making a significant financial gift out of current cash. However, those same individuals might be perfectly willing to provide some type of deferred contribution or life-income gift.

Only 22 percent of Americans over the age of 30 say they have been approached by a nonprofit organization to consider a planned gift, according to a survey by the Stelter Company. Imagine how much more revenue would be generated if more nonprofit organizations asked more people for a planned gift.

Tanya Howe Johnson, President and CEO of PPP, will continue serving on the Executive Committee until her retirement, April 30, 2012. PPP is engaging in a national search for her successor.

PPP engages in research, education, advocacy, community dialogue and the setting of standards and best practices in philanthropic planning. PPP is supported by 113 local councils and over 8,000 individual and council members, as well as charities, associations and business organizations that support the mission of charitable giving made most meaningful. For more information about PPP, visit: www.pppnet.org.

An alleged child-rapist and an admitted child-rapist are in the news again. Both news stories involve large sums of money.

The first news item concerns former Penn State Football Defensive Coordinator Jerry Sandusky and the University’s year-end fundraising efforts. (You can read my first blog post about Sandusky and Penn State: “Tragic Lessons of the Penn State Fiasco.”) While I hope you never have to cope with such a heinous crisis in your professional life, you will, unfortunately, be likely to find yourself dealing with at least one major challenge during your career. The Penn State situation is instructive.

The second news item concerns famed movie director Roman Polanski and his recently released film Carnage. At the end of this post, I’ll very briefly discuss the idea of not enriching this admitted child rapist through the purchase of a movie ticket.

Jerry Sandusky (middle)

On November 5, 2011, in the midst of the prime year-end fundraising season, Pennsylvania Attorney General Linda Kelly and State Police Commissioner Frank Noonan announced the results of a grand jury investigation that led to Sandusky being charged with sexually abusing eight boys. Two Penn State officials were also charged with related crimes though neither was directly involved in the abuse. A total of four Penn State officials either resigned or were fired within days of the release of the grand jury report including living legend, Coach Joe Paterno.

Penn State has been working to deal with the various challenges resulting from the Sandusky mess. The development staff has had the monumental task of having to continue to raise money for Pennsylvania’s flagship public university.

An Associated Press report has revealed, “‘The overwhelming majority of [Penn State’s] leading donors have made public statements affirming their faith in the University and its future,’ according to the University’s talking points. The document named a couple who gave $88 million to launch an NCAA ice hockey program, and another who endowed the position of head football coach. Both the number of donors and number of gifts to Penn State increased in November, compared with the same month a year earlier. Total donations to Penn State were $3.1 million in November, compared to $1.1 million in November 2010, according to the University. Another positive sign for Penn State was [December’s] announcement of a $10 million gift from an anonymous donor to bridge engineering research projects with other fields of study.”

A year-end annual fund appeal provides some insight into how the development staff is handling the fundraising challenge. Garvin Maffett, EdD, Executive Consultant at INJOY and a Penn State alumnus, received an annual fund email appeal in December from the University. He posted the appeal on LinkedIn at the CFRE International Network Group. If you’re a CFRE and would like to see the reaction the posting received, go to LinkedIn and subscribe to the Group. The responses have been generally constructive and supportive.

Here is the Penn State appeal from Dec. 19 as posted by Maffett:

The recent allegations against former and current Penn State employees have shaken our community to its core. But the University’s central mission to educate the leaders of tomorrow is as important now as ever before. We are 96,000 students, 46,000 employees, and more than half a million alumni. We are a university committed to providing educational opportunities and improving the lives of our students and communities. We are Penn State.

The University, led by our newly appointed president, Rodney A. Erickson, is working to repair the trust of the Penn State community and the nation. We are pursuing an aggressive, independent investigation of the allegations and a reevaluation of the University’s protocols and procedures, and have promised to share the results with the public. In addition, the President will be appointing a University-wide ethics officer to ensure we continue to meet the moral standards our institution has long represented.

We recognize that this is also an opportunity to increase awareness at the societal level about the devastating impact of sexual abuse. At the heart of these accusations is the issue of child abuse, and, as members of a leading research institution, we believe we can do much to bring awareness and change. To begin these efforts, Penn State is establishing the Penn State Hershey Center for the Protection of Children. The center, which will be located at the Penn State Hershey Children’s Hospital, will bring together clinicians, scientists, legal scholars, and educators to improve the detection, treatment, and prevention of child maltreatment. In addition, the University has partnered with the Pennsylvania Coalition Against Rape (PCAR) and the National Sexual Violence Resource Center, and has committed $1.5 million of our share of this year’s Big Ten bowl proceeds to help fund initiatives with these organizations.

We thank you for your loyalty and dedication to the University, and we ask you to continue to show your support for Penn State. As the University moves forward, we will also be relying upon the leadership of alumni like you, who represent all that’s best about Penn State in your own communities every day. There’s never been a more important time for Penn Staters to stand up for the values and the institution that we believe in. By remaining focused on the work of our students and faculty and the goals of For the Future: The Campaign for Penn State Students, we will make Penn State a better, prouder, and stronger university.

Choose to support Penn State; make your gift today.

Thank you!

Ann E. Lehman

Director, Penn State Annual Giving

P.S. Follow this link to make a special gift of support to the Penn State Hershey Center for the Protection of Children.”